Mortgage Points Calculator 2026: Should You Buy Down Your Rate? (Real Math)
Mortgage points 2026: Pay 1% of loan amount upfront to lower your interest rate by ~0.25%. Example: $300K loan, 1 point = $3,000 upfront = 0.25% lower rate (6.50% → 6.25%) = save $45/month = 67-month breakeven. Worth it if staying 6+ years. NOT worth it if selling in 3-5 years. Tax deductible for purchases (NOT refinances). Compare rates with/without points. Related: Lower mortgage payment guide.
💰 The Quick Answer (January 2026):
What: 1 point = 1% of loan amount = ~0.25% rate reduction
Cost: $300K loan = $3,000 per point
Savings: 0.25% lower = $45/month = $540/year
Breakeven: $3,000 ÷ $45 = 67 months (5.6 years)
✅ Worth it if staying 6+ years. ❌ NOT worth it if selling in 3-5 years.
Mortgage Points Calculator (2026 Rates)
Calculate Your Breakeven Point
📊 Your Scenario:
💵 The Math:
🎯 Decision: Worth it if staying 6+ years!
After 67 months, you save $45/month forever = $16,200 over 30 years!
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What Are Mortgage Points? (Simple Explanation)
Mortgage points (also called discount points) are an upfront fee you pay to your lender to permanently lower your interest rate. Think of it as "buying" a lower rate.
📐 The Formula:
- 1 point = 1% of loan amount
- 1 point = ~0.25% rate reduction (varies by lender)
- Example: $300K loan × 1% = $3,000 per point
- Result: 6.50% rate → 6.25% rate
💡 Real Example:
Scenario: $400K loan, 6.75% rate, 30 years
Option 1: No points = $2,596/month
Option 2: Buy 2 points ($8,000) = 6.25% rate = $2,462/month
Savings: $134/month = $1,608/year
Breakeven: $8,000 ÷ $134 = 60 months (5 years)
30-year savings: $48,240 - $8,000 = $40,240 profit!
5 Real Scenarios: Should You Buy Points?
Scenario 1: Forever Home (30+ years)
✅ BUY POINTSSituation: $350K loan, 6.50% rate, staying 30 years
Buy 1 point: $3,500 upfront = 6.25% rate = save $52/month
Breakeven: 67 months (5.6 years)
30-year savings: $18,720 - $3,500 = $15,220 profit
💡 Decision: ABSOLUTELY worth it! You'll save $15K+
Scenario 2: Starter Home (3-5 years)
❌ DON'T BUYSituation: $250K loan, 6.75% rate, selling in 4 years
Buy 1 point: $2,500 upfront = 6.50% rate = save $38/month
Breakeven: 66 months (5.5 years)
4-year savings: $1,824 - $2,500 = -$676 LOSS
💡 Decision: NOT worth it! You'll lose $676
Scenario 3: Refinance (10+ years left)
✅ BUY POINTSSituation: $300K balance, 7.00% rate, 15 years left
Buy 2 points: $6,000 upfront = 6.50% rate = save $90/month
Breakeven: 67 months (5.6 years)
15-year savings: $16,200 - $6,000 = $10,200 profit
💡 Decision: Worth it! You'll save $10K+
Scenario 4: Uncertain Timeline (5-7 years)
⚠️ MAYBESituation: $400K loan, 6.50% rate, might move in 6 years
Buy 1 point: $4,000 upfront = 6.25% rate = save $60/month
Breakeven: 67 months (5.6 years)
6-year savings: $4,320 - $4,000 = $320 profit
💡 Decision: Borderline. Small profit if you stay 6 years.
Scenario 5: Jumbo Loan (High Balance)
✅ BUY POINTSSituation: $800K loan, 6.75% rate, staying 20 years
Buy 2 points: $16,000 upfront = 6.25% rate = save $240/month
Breakeven: 67 months (5.6 years)
20-year savings: $57,600 - $16,000 = $41,600 profit
💡 Decision: DEFINITELY worth it! Huge savings on large loans
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Tax Benefits of Mortgage Points (2026)
✅ Purchase: Fully Deductible (Year 1)
If you buy a home (not refinance), you can deduct the full point cost in the year you paid it.
💰 Example:
Buy $400K home, pay $4,000 in points (1 point)
Tax bracket: 24%
Tax savings: $4,000 × 24% = $960
Effective point cost: $4,000 - $960 = $3,040
⚠️ Refinance: Amortized Over Loan Life
If you refinance, you must amortize the deduction over the life of the loan (30 years = deduct 1/30th per year).
📊 Example:
Refinance $300K loan, pay $3,000 in points (1 point)
30-year loan
Annual deduction: $3,000 ÷ 30 = $100/year
Tax bracket: 24%
Annual tax savings: $100 × 24% = $24/year
When NOT to Buy Points
❌ 1. Selling in <5 Years
Typical breakeven is 5-7 years. If you're selling before breakeven, you lose money. Starter homes, job relocations, military = don't buy points.
❌ 2. Low Cash Reserves
If buying points leaves you with <6 months emergency fund, don't do it. Cash reserves > slightly lower rate. You need buffer for repairs, job loss, etc.
❌ 3. Planning to Refinance Soon
If rates are expected to drop and you'll refinance in 1-2 years, don't buy points. You won't reach breakeven before refinancing (and losing the benefit).
❌ 4. High-Interest Debt
If you have credit card debt (18-24% APR), pay that off first. Saving 0.25% on mortgage (6.50% → 6.25%) is NOT worth it when you're paying 20% elsewhere.
Frequently Asked Questions
How much does 1 point lower your mortgage rate?
Typically 0.25% per point in 2026. Can vary 0.125%-0.375% depending on lender, loan type, credit score. Always ask lender for exact rate reduction per point. Some lenders offer 0.125% per 0.5 point (more flexibility).
Can you negotiate mortgage points?
YES! Points are negotiable. Shop 3-5 lenders, compare point costs and rate reductions. Some lenders offer better deals (0.30% reduction per point vs 0.25%). Also negotiate origination fees (separate from discount points).
What's the difference between discount points and origination points?
Discount points: Lower your rate (what this article covers). Origination points: Lender fees for processing loan (does NOT lower rate). Only discount points are worth buying. Origination points are negotiable fees you should minimize.
Can seller pay for points?
YES! Seller can pay up to 3-6% of purchase price in seller concessions (includes points, closing costs). Negotiate this in your offer. Example: $400K home, seller pays $12K (3%) = covers 3 points ($12K) = 0.75% lower rate!
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